Investment in KCS

6 Months Ended

Jun. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

On April 14, 2023 the Company assumed control of KCS and subsequently derecognized its previously held equity method investment in KCS of $44,402 million as of April 13, 2023 (December 31, 2022 - $45,091 million).

For the period April 1 to 13, 2023 and the period January 1 to April 13, 2023, the Company recognized $26 million and $230 million of equity earnings of KCS, respectively (three and six months ended June 30, 2022 - $208 million and $406 million, respectively), and received dividends from KCS for the period April 1 to 13, 2023 and the period January 1 to April 13, 2023 of nil and $300 million respectively (three and six months ended June 30, 2022 - nil and $334 million respectively). The foreign currency translation of the investment in KCS for the period April 1 to 13, 2023 and January 1 to April 13, 2023, totaled losses of $41 million and $578 million, respectively (three and six months ended June 30, 2022 - gains of $608 million and $694 million, respectively). Included within the equity earnings of KCS recognized for the period April 1 to 13, 2023 and the period January 1 to April 13, 2023 was amortization (net of tax) of basis differences of $6 million and $48 million, respectively (three and six months ended June 30, 2022 - $39 million and $79 million, respectively). These basis differences relate to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and are amortized over the related assets' remaining useful lives and the remaining terms to maturity of the debt instruments.

The following table presents summarized financial information for KCS, on its historical cost basis:

Statement of Income


(in millions of Canadian dollars)(1)	For the period April 1 to April 13, 2023		For the three months ended June 30, 2022		For the period January 1 to April 13, 2023		For the six months ended June 30, 2022
Total revenues	$	164	$	1,079	$	1,351	$	2,065
Total operating expenses	109		680		888		1,297
Operating income	55		399		463		768
Less: Other(2)	9		59		83		98
Income before income taxes	46		340		380		670
Net income	$	34	$	248	$	280	$	485

(1) Amounts translated at the average FX rate for the period April 1 to April 13, 2023 and three months ended June 30, 2022 of $1.00 USD = $1.35 CAD and $1.00 USD = $1.28 CAD respectively. Also, for the period January 1 to April 13, 2023 and six months ended June 30, 2022 of $1.00 USD= $1.35 CAD and $1.00 USD = $1.27 CAD respectively.

(2) Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net.